Down more than 50%, Is It Time to Buy Moderna Shares as Biotech Charts New Post-Covid Path?

Modern therapeutics (MRNA -2.01%) was once the darling of the healthcare space for investors. The company has become one of the biggest names in the COVID-19 pandemic with its vaccine. While COVID hasn’t gone away, the virus is no longer in the spotlight and fewer people feel the need to update their vaccinations for the disease.

With the stock now more than halved from its 52-week high, the company recently laid out a plan for its business on Investor Day 2024. While these events are often catalysts for stocks, investors didn’t like what they heard, sending Moderna shares lower.

A new way forward

Moderna set three priorities at the Investor Day.

The first was increased use of the Spikevax and mRESVIA vaccines. Spikevax is the company’s current vaccine against COVID-19, which was recently approved by the US Food and Drug Administration (FDA) to help fight the newest strains of the virus that are expected to be widespread this fall and winter.

While the company has long touted the effectiveness of the COVID vaccine, increasing the use of the COVID vaccine appears to be an uphill battle. Moderna’s COVID vaccine sales fell off a cliff, with revenue of just $241 million in the second quarter, down 30% from $344 million a year ago. It had total revenue of $19.3 billion for the full year 2022, mostly from the COVID vaccines, but that fell to $6.8 billion in 2023.

mRESVIA is Moderna’s vaccine for lower respiratory tract infections caused by respiratory syncytial virus (RSV). It is for adults 60 years and older. The vaccine is approved in the US and the European Union, as well as in Qatar. Adoption of the vaccine has been slower than expected in the US, but the recent EU approval should help boost international sales as it launches in new markets in 2025. Moderna also expects to win approval to expand label in high-risk individuals. the age of 60 years. It considers expanding the product to younger adults as having a total addressable market (TAM) of $10 billion.

Moderna is also looking to bring 10 new products to market over the next three years. That includes expanded off-label use of an RSV vaccine, as well as a new COVID vaccine and a combination flu plus COVID vaccine for adults 50 and older, which is expected to be filed this year. They are also looking at a new flu vaccine that can be updated more quickly to attack the latest strains. It sees this as a total addressable market of $7 billion, and its new COVID vaccine as having a TAM of $8 billion.

Moderna is looking into vaccines for diseases such as norovirus and cytomegalovirus, which can cause a number of birth defects. In addition, it works with Merck to develop a cancer vaccine.

The company said it is looking to reduce the pace of its research and development (R&D) spending while continuing to focus on its major clinical programs. Overall, it seeks to cut research and development by $1.1 billion annually starting in 2027. That would drop from about $4.8 billion this year to $3.7 billion in 2027.

Moderna expects to break even on cash flow in 2028 on revenue of $6 billion. It said its balance sheet is sufficient to fund its current R&D investments without needing to raise capital.

Looking ahead, management estimates 2025 revenue to be between $2.5 billion and $3.5 billion, and expects a compound annual growth rate (CAGR) of approximately 25% between 2026 and 2028.

Image source: Getty Images.

Is it time to buy the beaten-down stocks?

Moderna laid out an ambitious plan to grow revenue and break even on operating cash flow over the next few years. However, they will need to see their new vaccines approved by the FDA for them to gain acceptance as well. With many of the products originally aimed at respiratory diseases, lower-than-expected initial adoption of mRESVIA and skepticism about the COVID booster vaccines may not bode well for the sales growth the company is hoping for.

At the same time, Moderna will be burning through the nice pile of cash it has accumulated. It currently has $8.5 billion in cash and no debt on its balance sheet. It had cash outflows of $2.6 billion in the first six months of this year.

Meanwhile, with a market cap of about $27 billion, the stock is expensive for a company that projects revenue of about $3 billion next year, is losing money and burning through cash. That’s a forward price-to-sales ratio of about 9 times.

As such, I think investors should stay on the sidelines with Moderna. Even after its big drops, there seems to be more potential downside ahead.